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Economists assume that individuals:

are rational and respond to incentives.

a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?

a, b, and c

What does the term "marginal" mean in economics?

an additional or extra

If the marginal cost of producing a television is constant at $200, then a firm should produce this item

If the marginal cost of producing a television is constant at $200, then a firm should produce this item

Suppose a cell-phone manufacturer currently sells 20,000 cell-phones per week and makes a profit of $5,000 per week. A manager at the plant observes, “Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones.” Had the firm not produced and sold the last 3,000 cell phones, would its profit be higher or lower, and if so by how much?

Its profit will be $700 higher.

Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?

Research finds that consumption of olive oil reduces the risk of heart disease.

In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for vineyards. At the same time, more and more Americans prefer wine over beer. Which of the following best explains the effect of these events in the wine market?

The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Brett buys a new cell phone for $100. He receives consumer surplus of $80 from the purchase. How much does Brett value his cell phone?

$180

The producers' decision to cut production and raise the price of granola results in the same outcome as if the government had imposed what policy?

Price Floor

The minimum wage is an example of

a price floor

A tariff on imports into the U.S. of ethanol from Brazil would help __________, but would hurt ______________.

U.S. producers of ethanol; U.S. consumers who purchase ethanol

What is the difference between comparative and absolute advantage?

Comparative advantage determines which country can produce a good at lowest opportunity cost, while absolute advantage determines which country can produce more a good with a given amount of resources.

Suppose that the United States can produce 200 million donuts or 5 million cars in a year. Canada can produce 800 million donuts or 4 million cars in a year. If these are the only goods the countries produce, at what terms of trade with the United States and Canada gain from trading with one another?

Canada will buy cars from the U.S. in exchange for anything less than 200 donuts per car.

A country "gains" from trading with other countries if

it exports the goods for which it has comparative advantage and imports the goods for which it does not have comparative advantage.

Economic analysis of comparative advantage shows that a nation should specialize in the production of goods for which it has a comparative advantage. But in the real world, most production in a nation is not 100 percent specialized. Why don't nations specialize 100 percent in reality?

A) Some services such as medical services, would be difficult to export to other nations.
B) Since tastes differ, some products such as autos are produced in many different nations.
C) Typically, as specialization advances, there are increasing opportunity costs which make 100 percent specialization too costly for exportation.
D) All of these explain why nations do not specialize completely.